SPEECHES & TESTIMONY

Opening Statement, Public Meeting on Proposed Rules Under Dodd-Frank Act

Commissioner Michael V. Dunn

December 9, 2010

Thank you all for joining us today for this important meeting regarding the implementation of the Dodd-Frank Act. Today’s meeting will address proposed rules regarding:

Business conduct standards for swap dealers and major swap participants with counterparties;

End-user exception to mandatory clearing of swaps; and

Governance requirements for DCOs, DCMs and SEFs.

The business conduct standards for swap dealers and major swaps participants is of particular interest to me, because I believe that strong standards for swap dealers and MSPs are necessary to prevent another financial crisis. By implementing strong business conduct standards, the Commission can establish meaningful protections for counterparties and hopefully prevent the types of behavior that necessitated the passage of Dodd-Frank.

An inherent conflict of interest exists when a swap dealer acts as both an advisor and counterparty to its customers. The business conduct standards proposed today provide meaningful protections to counterparties, and I support them, but I believe more can be done. I am particularly interested in public comment on this rulemaking, specifically whether the proposed rules go far enough in protecting counterparties.

Dodd-Frank requires the Commission to consider whether to except small banks, savings associations, farm credit institutions, and credit unions from the definition of “financial entity” and thus the clearing requirements. I welcome public comment as to whether any of these groups should be exempt, and if so, why. Specifically, with regard to farm credit institutions, I would like to know if the $10 billion cap on total assets meets the Congressional intent.

In 2000, Congress prohibited the CFTC from regulating the swaps market. A decade later, and after a global financial meltdown, it is apparent that this should change. However, it is impossible to turn back the clock, and over the course of the last decade the swaps markets have grown to accommodate the services they provide. I look to comments from people with expertise in the swaps markets to help me understand this area.

I would like to once again thank the staff at the CFTC for all their hard work in regard to these very important proposed rules.